Q3Quarter 3, 2017
THELISNEYBELFASTCOMMERCIALPROPERTYREPORT
The Difference
The Market in Numbers
£199 million of transactions during Q3
Investment
£199m
Take up throughout Belfast City Centre in Quarter 3, 2017
Office
91.5ksq ft
Prime rents stabilising in BelfastCity Centre
Retail
Notable transactions during Quarter 3, 2017
Industrial
263ksq ft
£150psf za
Q3 has seen a significant jump in volumes to £199m following the quiet opening months of the year with less than £30m transacted in the run up to the summer. The most significant transaction being Wirefox’s acquisition of Castlecourt in a deal worth c. £123m. In a subdued retail investment market right across the UK it’s positive to see off shore equity buying into Northern Irish retail, and when combined with Tesco, Newry and Valley Retail Park, Newtownabbey selling for a combined £39m we’re seeing a much busier start to H2 2017. Office investments and a portfolio of care homes make up a significant proportion of the remainder.
Investment
Overview
Activity
Property Details Pricing
Longwood Retail Park,
Newtownabbey 190,000 sq.ft retail park £47.78m/7.25%
Laharna Retail Park, Larne 48,000 sq.ft retail park £4.87/9.5% (Remarketed)
M2 Trade Centre, Duncrue 38,000 sq.ft industrial park £1.15/8.82% (Agreed)
Hillview House,
Newtownabbey 55,000 sq.ft office £3.75/13.08% (Agreed)
On The Market, Q3 2017
Page 2
Our prediction of investment volumes hitting £300m looks to be on course with a number of transactions including Riverside Retail Park in Coleraine set to complete before year end, and with Longwood Retail Park in Newtownabbey currently in the market we could potentially surpass that estimate. Either way volumes have surpassed last year’s levels which is a notable positive in our current Brexit vacuum.
Where we must sound a note of caution though is in the depth of the purchaser market. A number of the assets agreed or recently traded had been in the market longer than first intended and with funds and Property Companies still relatively quiet we’re looking to private equity and local asset managers to drive activity for the larger lots. Delivering enough product with return profiles suited to this type of purchaser remains
a challenge, however our main sectors remain robust with demonstrable, sustainable growth which positions NI well to attract investors when the uncertainty associated with Brexit begins to clear as exit negotiations advance.
One notable sector where we can point to very strong performance is sub £2m. Anecdotally many of the purchasers are utilising the tax benefits of SIPPs and SSASs, and are keen to deploy capital given uncertainty in the equity markets. Hence where properties are relatively low risk and well let we have seen pricing surpass equivalent investments in GB due to lack of stock locally. In our current low interest rate environment property remains a compelling proposition hence we expect this trend to continue in the short to medium term.
Investment Volumes, Q3 2016 - Q3 2017
Q12017
Q42016
Q32016
Q22017
Mill
ion
£ (S
terl
ing)
Q32017
180m
20m
40m
60m
80m
100m
120m
140m
160m
200m
45m 40m
8m 18m
199m
The Lisney Northern Ireland Commercial Property Report Q3 2017
Property Details Pricing Status
Castlecourt Shopping Centre, Belfast
340,000 sq.ft. covered shopping centre
£123m/6.27% Sold
Valley Retail Park, Newtownabbey
100,000 sq.ft. retail park £11.1/8.25% Sold
Tesco Extra, Newry 94,000 sq.ft. foodstore £27.7m/6% Sold
Lesley Exchange, Belfast 18,263 sq.ft. office £3m/7.85% Sold
Notable Transactions, Q3 2017
Investment
Page 3
Office
Take-up levels in Quarter 3 reflected a more functional occupier market with c. 91,557 sq. ft. of City centre office space transacting compared to c. 43,000 sq. ft. and c. 18,034 sq. ft. in Q2 and Q1 respectively.
Overview
Activity
The Lisney Northern Ireland Commercial Property Report Q3 2017
2012
Headline Rents
11.0012.0013.0014.0015.0016.0017.0018.0019.0020.0021.0022.0023.00
Rent
£/P
SF
2013
2014
2015
2016
2017
2018
Headline Rents, Q2 2017
Deals completed show a healthy spread of take up ranging from transactions of 1,000 sq. ft. to 25,000 sq. ft. with a mix of both indigenous occupiers and new market entrants taking space; an encouraging indicator of market resilience given the ongoing political uncertainty. Belfast’s reputation as a hotbed of activity in the tech and digital sectors continues to gain momentum and is further evidenced by Q3 office take up which shows c. 56% of letting activity attributable to occupiers operating in these
sectors, to include software design, cyber security, fintech and digital services.
This is a trend which we expect to continue through to Q4 2017 due to a number of lettings which have been agreed in Q3 , to occupiers operating in these sectors.
Chichester House will be Belfast’s first office development to carry a WiredScore certification
Page 4 The Lisney Northern Ireland Commercial Property Report Q3 2017
Office
In light of this activity, We are now witnessing developers who are prepared to embrace the change in Belfast’s occupier market by future proofing their buildings ensuring top class digital connectivity. In Q3, Causeway Asset Management launched Chichester House, Chichester Street and in a Belfast market first, the building will have a WiredScore certification. WiredScore is the premier provider of a standardised rating system designed to identify, evaluate and verify commercial buildings with the fastest and most reliable internet connections.
Landlord Tenant Size (sq. ft.) Location
Armagh House Limited First Derivatives 25,0381st – 4thFloors, Weaving Works,
Ormeau Avenue
Belfast Harbour Commissioners ITV 11,5648th Floor, City Quays 2,
Clarendon Dock
Straidorn Properties Metaswitch 5,5004th Floor, Flax House, Adelaide
Street
Redbay Developments Instil Media 4,4453rd Floor, Linen Loft, Adelaide
Street
Private Landlord Anomali 4,1764th Floor, State Building,
Arthur Street
Office Take Up, Q3 2017
Tech/Digital Companies51,023 sq ft
Other Occupiers40,534 sq ft
44%
56%
Total Q3 Office Take Up91,557 sq ft
Q3 Take Up Analysis
In Focus • WiredScoreWired Certification is a commercial real estate rating system that empowers landlords to understand, improve, and promote their buildings’ digital infrastructure.
Internet is among the top three most important factors for tenants who are searching for office space, along with cost and location. Until now there has been very little information available to tenants about the quality of internet connectivity in office spaces.
Wired Certification provides that transparency and access to information to tenants. The certification measures the aspects of
developments and redevelopments that will most significantly impact a tenant’s ability to run their business.
Getting Wired Certified is a 3 step process and once achieved, a building’s Wired Certification level is valid for 2 years or until the building is 2/3rds full. Maintaining a current WiredScore Certificate gives occupiers the confidence that a landlord is keeping pace with developing technologies and has taken the required measures to provide reliable digital connectivity today while future-proof the building for tomorrow.
Page 5
Retail
Q3 saw sustained levels of activity, but was more of a balance between Belfast and the regions. Notably however in a change to the norm, almost all Belfast activity happened outside the City Centre, as the lack available units is continuing to impede new lettings and slowing rental growth.
In another variation to the previous quarters, regional activity was not led by border locations, where new openings slowed, as quality retail pitches begin to reach full occupancy.
Coffee operators continue to be amongst the most active, with competitive tension and a desire to build, or at least maintain market share driving expansion. Caffe Nero has been the most active in Q3 and Canadian Fast Food Operator Tim Horton’s is due to complete their first acquisition early in Q4. With more on the way we expect this market to continue to thrive especially where there is scope for drive-thrus.
In the retail warehousing sector vacancy levels continue to fall, with a considerable pool of retailers actively searching for opportunities to expand their portfolios. Marks and Spencer hit the headlines as they announced plans for a new c. 16,000 sq ft store in Craigavon, on part of the site formerly occupied by B&Q. Elsewhere, TK Maxx completed their move from Bow Street Mall to Laganbank Retail Park, Lisburn, and Lidl opened at their newly developed site in Connswater, Belfast. We anticipate a busy start to Q4 with retailers pushing to finalise acquisitions and openings prior to Christmas, before turning to focus on their 2018 plans. Supply in key areas will continue to hamper progress, most notably in Belfast City Centre and in the major border towns where we expect to see the euro spend surpass levels of 2016.
Overview
Tim Hortons will arrive in NI during Q4
Activity
The Lisney Northern Ireland Commercial Property Report Q3 2017
Both opening quarters of 2017 were similarly busy in terms of new lettings, but differed in where activity was taking place. Q1 was in the majority, Belfast–centric, as we have become used to, but turning against the grain in Q2, the greater part of activity was spread beyond Belfast in regional locations.
Trader Type Location Town/City
Sostrene Grene Shopping Centre The Quays Newry
Yankee Candle Shopping Centre Bloomfield SC & RP Bangor
JD Sports Shopping Centre Bloomfield SC & RP Bangor
Inglot Shopping Centre Foyleside SC Londonderry
Specsavers High Street Conway Square Newtownards
Greggs Food & Beverage Church Street Coleraine
Caffé Nero Food & Beverage Ormeau Road Belfast
Caffé Nero Food & Beverage High Street Newcastle
Little Wing Food & Beverage Lisburn Square Lisburn
TK Maxx Out of Town Laganbank Retail Park Lisburn
Notable Transactions, Q3 2017
Industrial
The protectionist measures being imposed in the Bombardier/Boeing debate is the major discussion point in the industrial sector at present although there appears to be some murmurings of a potential solution at the time of writing. We do hope that an agreement can be reached for the greater good of the local economy. This coupled with the persistent stories around Brexit and Stormont and the news that Caterpillar are proposing to downsize has created some negativity which you would expect to result in lower activity.
However to counteract this it should be noted that according to insolvency and restructuring trade body R3 and somewhat paradoxically Northern Ireland’s manufacturing sector has the lowest rate of firms in “the higher than normal risk of insolvency” category compared to anywhere else in the UK.
As expected the summer months were generally a slower period in the market however and notably Ryobi have taken further space within Kilroot Business Park, Carrickfergus, bringing their total occupation on site up to nearly 80,000 sq ft.
A number of other deals have been completed to include the former Denny’s site at Corcrain Road, Portadown , comprising 137,660sq ft on 6.15 acres. The property has been purchased by
Armagh City, Banbridge and Craigavon Borough Council and we understand it will be regenerated to enhance the area and complement the planned park and ride facility on an adjacent site.
In addition at 5 Michelin Road in Mallusk a unit of 20,897 sq ft on a regular shaped site of 2.75 acres has been acquired for well over the asking price.
In a more provincial context up to 100,000 Sq Ft has become available in Magherafelt with the first unit in the develeopment to come to the market comprising more than 41,000 sq ft of warehouse/industrial accommodation.
Meanwhile other positive corporate activity in the sector is evidenced with the corporate purchase of Moy Park by Pilgrim’s Pride Corporation for $1.3 billion.
Overview
Ryobi took further space at Kilrrot Business Park
Activity
The Lisney Northern Ireland Commercial Property Report Q3 2017Page 6
Location Size (Sq Ft) Type
6 Corcrain Road , Portadown 137,660 Sale
Kilroot Business Park, Carrickfergus 79,500 Lease
Building 1, Unit 4 Central Park, Mallusk 22,421 Lease
5 Michelin Road, Mallusk 20,897 Sale
A3, Heron Business Park, Belfast 3,300 Sale
Total 263,788
Notable Industrial Transactions, Q2 2017
BELFASTMontgomery House, 29-33 Montgomery Street, Belfast, BT1 4NXT: +44-2890-501501E: [email protected]
DUBLIN St. Stephen’s Green House,Earlsfort Terrace, Dublin 2D02 PH42T: +353 1 638 2700E: [email protected]
CORK1 South Mall,CorkT12 CCN3T: +353 21 427 5079E: [email protected]
LONDON33 Cavendish Square, Marylebone, LondonUnited Kingdom, W1G 0PWT: +44-203-714-9055E: [email protected]
Our Offices
lisney.com
@LisneyBelfast
Lisney Northern Ireland
The Lisney Northern Ireland Commercial Property Report Q3 2017
Investment
• Investment values to surpass last year’s totals and potentially break £300m
• Pension buyers remain very active in midst of inflationary pressures
• Brexit uncertainty has affected purchaser pool
Office
• Take up levels in 2017 will be less than the long term average of 300K to 400K P.A.
• There is a current derth of large requirements in excess of 30,000 sq ft.
• Supply to increase throughout 2018 (mainly refurbished buildings).
Retail
• Retail Demand strong in prime locations.
• Cost Inflation resulting in higher prices at the tills.
• Competitive tension in the coffee sector.
Industrial
• Demand from export focused manufacturing strong reflecting the fall in the value of sterling.
Outlook
Chris CampbellMarketing Manager
Jonathan HaugheySurveyor
The Lisney Research Team
David McNellisDirector (Agency)
Nicky FinniestonDirector (Retail & Investment)
Declan FlynnManaging Director
Andrew GawleyAssociate Director (Agency)
Stephen ChambersAssociate Director (Investment)
Gareth JohnstonDirector (ProfessionalServices)
Lloyd HanniganSenior Surveyor (Agency)
Industrial
A further positive announcement is that goods exports from Northern Ireland for quarter 2, 2017 shows an increase of 12% (compared to Quarter 2 in 2016).
According to figures released by HM Revenue and Customs this is the best quarter on record in nominal terms, and shows that the biggest increase from NI was to the Republic of Ireland. If a ‘hard ‘ border occurs during Brexit then this would certainly affect local exporters.
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